Is robo investing better than traditional investing? See the pros and cons

Robo advisors are automated investment platforms that use algorithms to manage and allocate investor's funds. These services analyze each customer's current financial status, risk aversion, and goals. From here, they recommend the best portfolio of stocks available based on that data.

Thanks to this ease of use, robo investing or automated investing has been on the rise in recent years. The reasonably wide selection of online financial advisory services on the market has given consumers options for automating their investments.

BI Intelligence, Business Insider's premium research service, forecasts that robo advisors will manage approximately 10% of all global assets under management (AUM) by 2020. This would equate to approximately $8 trillion. So it's clear that these automated services are becoming more prevalent.

But a user-friendly experience is just one reason that robo investing has been steadily growing in popularity. Below, we've put together a list of the four most significant factors in automated investing growth.

1) Global wealth is concentrated. The majority of worldwide AUM is in the hands of an extremely small portion of the global population. Therefore, only a few high-net-worth individuals (HNWIs) would need to let robo advisors manage even a portion of their money in order to drastically affect the AUM for automated investors. BI Intelligence expects 60% of these HNWIs to invest 20% of their assets in robo advisors by 2020, which would equate to approximately $6.4 trillion.

2) Asia will push robo advisor adoption. The Asia-Pacific (APAC) region will overtake the U.S. in investable wealth later this year. Therefore, BI Intelligence expects the APAC region to represent $2.4 trillion in robo advisor AUM by 2020.

3) Consumers are interested in automated investment. The investing public is largely receptive to robo advisors thanks to the services' ease of use and ability to take stress and worry away from investors. BI Intelligence found that 49% of HNWIs worldwide would consider letting a robo advisor manage at least some of their wealth.

4) Robo advising has advantages over traditional human financial advisors. In a majority of cases, companies are able to offer robo advisor services with significantly lower fees than traditional human advisors while still maintaining approximately the same return on investment. This lets these companies promote themselves to a much broader segment of the market, such as millennials who might be otherwise averse to place their trust and their money into a human advisor's hands.

On top of this, robo advisors usually automate items such as application processing. This eliminates a portion of the friction for customers and also helps companies lower their labor costs, which then turns into savings for customers.

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